Spokane Valley reduced its gambling tax rate from 10 percent to 6 percent three years ago to help businesses like the Black Pearl Casino and Poker Room remain competitive with card rooms in Spokane that pay less in taxes.
Now Ian Riley, owner of the Black Pearl, is asking Spokane Valley City Council to lower the city’s gambling tax even further.
Attorney Eric Sachtjen of Paine Hamblen, who represents the Black Pearl, testified at a Nov. 13 council meeting that his client is at an unfair disadvantage competing against Spokane card rooms that pay a 2 percent tax.
“My client is estimated to pay about $280,000 in gaming tax to the city of Spokane Valley … the tax, at 6 percent, is three times what the city of Spokane charges,” he said. “If my client were to pick up and move a few miles west, they’d save two-thirds of that tax and move jobs from the city of Spokane Valley to the city of Spokane.”
Spokane lowered its gambling tax rate for card games from 8 percent to 2 percent in 2016.
“The changes were adopted to protect jobs primarily, as other jurisdictions including unincorporated Spokane County had lower rates,” Marlene Feist, spokeswoman for the city of Spokane, said in an email.
Last year, Spokane generated more than $301,000 in gambling tax revenue, while Spokane Valley received more than $367,000.
Sachtjen asked Spokane Valley City Council members to consider matching Spokane’s 2 percent tax rate “so businesses like my client that employ a number of people are not put at a disadvantage and forced to relocate their businesses outside the city of Spokane Valley.”
“I think it would be good for everyone,” he said. “It may even bring in some other people.”
Riley asked the Spokane Valley City Council in 2014 to reduce the gambling tax, stating he was paying around $330,000 in taxes and that the card-room industry is shrinking because of taxation.
Spokane Valley lowered its gambling tax rate to 6 percent in 2015 to help local card rooms be competitive against similar establishments in the region. The city at that time estimated revenues from gambling tax – which is used to partially offset law enforcement costs – would decrease by $178,000.
“We got a reduction, and we were obviously pleased with that,” Riley said. “It helped us. It was great. But, unfortunately, things go up and we can’t do anything to increase our revenue.”
The Black Pearl generated more than $4.8 million in card-room revenue in 2016. After expenses including wages, utilities, depreciation and taxes, the establishment earned about $252,400 in profits that year, according to reports filed with the Washington State Gambling Commission.
Washington state card rooms generated more than $256 million in revenue last year and paid more than $24 million in local taxes, according to the commission.
However, the state’s card-room industry experienced a steep decline since 2001, primarily because of minimum wage increases, competition from larger casinos and low barriers to entry allowing new establishments to “spring up” periodically and cut into already thin profit margins, according to a 2016 market study by Spectrum Gaming Group.
Riley said he wants to keep the Black Pearl in the Valley but could consider a move to Spokane.
“I think we’d look at all options on the table. From a business point of view, you need to consider all options,” he said. “We are responsible for 105 peoples’ incomes and livelihoods, so if we were on a level playing field, it would be great.”
Spokane Valley Mayor Rod Higgins said he’s open to discussing the gambling tax, but matching Spokane’s tax rate would be a significant hit to the city’s revenue.
“The Black Pearl is a valued business,” he said. “But for us to try to match what Spokane is doing, it might be difficult.”
Spokane Valley Councilman Arne Woodard said there would have to be “some real compelling reasons” to lower the tax. He said he’s not necessarily inclined to reduce it but would be open to further discussion.
“If it comes up on our agenda, we can talk about it and see what happens,” he said. “I would like to hear what people think, and how they think lowering it would make a difference.”
Spokane Valley Councilman Ben Wick said he would also be open to discussing the city gambling tax and is curious to hear thoughts from the city of Spokane.
“I would encourage people to let us know what their thoughts are, and if they think we should lower our gambling tax rates or maintain them,” he said. “Because, right now, we’re only hearing from one business.”
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